WILLIAMS SONOMA INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements related to: continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; the continuing impact of inflation and measures to control inflation, including changing interest rates, on consumer spending; the continuing impact of global conflicts, such as the conflicts in Ukraine and the Middle East, and shortages of various raw materials on our global supply chain, retail store operations and customer demand; labor and material shortages; the outcome of our growth initiatives; new interpretations of or changes to current accounting rules; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; changes in consumer spending based on weather, political, competitive and other conditions beyond our control; delays in store openings; competition from companies with concepts or products similar to ours; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management; our ability to manage customer returns; uncertainties in e-marketing, infrastructure and regulation; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; challenges associated with our increasing global presence; dependence on external funding sources for operating capital; disruptions in the financial markets; our ability to control employment, occupancy, supply chain, product, transportation and other operating costs; our ability to improve our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; the impact of current and potential future tariffs and our ability to mitigate impacts; the potential for increased corporate income taxes; and other risks and uncertainties, as well as statements of belief and statements of assumptions underlying any of the foregoing. You can identify these and other forward-looking statements by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the …

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements related to: continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; the continuing impact of inflation and measures to control inflation, including changing interest rates, on consumer spending; the continuing impact of global conflicts, such as the conflicts in Ukraine and the Middle East, and shortages of various raw materials on our global supply chain, retail store operations and customer demand; labor and material shortages; the outcome of our growth initiatives; new interpretations of or changes to current accounting rules; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; changes in consumer spending based on weather, political, competitive and other conditions beyond our control; delays in store openings; competition from companies with concepts or products similar to ours; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management; our ability to manage customer returns; uncertainties in e-marketing, infrastructure and regulation; multi-channel and multi-brand complexities; our ability to introduce and grow new brands and brand extensions; challenges associated with our increasing global presence; dependence on external funding sources for operating capital; disruptions in the financial markets; our ability to control employment, occupancy, supply chain, product, transportation and other operating costs; our ability to improve our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; the impact of current and potential future tariffs and our ability to mitigate impacts; the potential for increased corporate income taxes; and other risks and uncertainties, as well as statements of belief and statements of assumptions underlying any of the foregoing. You can identify these and other forward-looking statements by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed u…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended April 28, 2024 (“first quarter of fiscal 2024”), as compared to the thirteen weeks ended April 30, 2023 (“first quarter of fiscal 2023”), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto. All explanations of changes in operational results are discussed in order of magnitude.

Current wording

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended July 28, 2024 (“second quarter of fiscal 2024”), as compared to the thirteen weeks ended July 30, 2023 (“second quarter of fiscal 2023”) and twenty-six weeks ended July 28, 2024 ("first half of fiscal 2024"), as compared to the twenty-six weeks ended July 30, 2023 ("first half of fiscal 2023"), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto. All explanations of changes in operational results are discussed in order of magnitude.

Previous wording

First Quarter of Fiscal 2024 Financial Results

Current wording

Second Quarter of Fiscal 2024 Financial Results

Previous wording

Net revenues in the first quarter of fiscal 2024 decreased $95.1 million or 5.4%, with company comparable brand revenue ("company comp") decline of 4.9%. This was driven by continuing customer hesitancy towards furniture purchases, partially offset by strength in our emerging brands, children's home furnishings and kitchen business. Company comp declined 10.9% on a two-year basis and declined 1.4% on a three-year basis.

Current wording

Net revenues in the second quarter of fiscal 2024 decreased $74.3 million or 4.0%, with company comparable brand revenue ("company comp") decline of 3.3%. This decrease was driven by continuing customer hesitancy towards furniture purchases, partially offset by strength in our emerging brands and our children's home furnishings business.

Previous wording

In the first quarter of fiscal 2024, Pottery Barn, our largest brand, saw 10.8% comparable brand revenue ("brand comp") decline, 11.2% brand comp decline on a two-year basis and 3.4% brand comp growth on a three-year basis. The first quarter decline was driven by reduced higher ticket furniture sales, partially offset by relative strength from our textile, easy decorating, and seasonal celebrations categories. The Pottery Barn Kids and Teen brands saw 2.8% brand comp growth in the first quarter of fiscal 2024, 0.5% brand comp decline on a two-year basis, and 3.6% brand comp decline on a three-year basis. The first quarter growth was driven by strength in our dorm and baby offerings.

Current wording

In the second quarter of fiscal 2024, Pottery Barn, our largest brand, saw 7.1% comparable brand revenue ("brand comp") decline driven by reduced higher ticket furniture sales, partially offset by relative strength from our decorating, entertaining and seasonal holiday categories. The Pottery Barn Kids and Teen brands saw 1.5% brand comp growth in the second quarter of fiscal 2024 driven by strength in our dorm and back-to-school offerings.

Previous wording

West Elm saw 4.1% brand comp decline in the first quarter of fiscal 2024, 19.9% brand comp decline on a two-year basis, and 7.1% brand comp decline on a three-year basis. The first quarter decline was driven by West Elm continuing to be affected by the customer pull back in furniture as a result of the brand's high percentage of its assortment in the furniture category and our strategy to reduce promotional activity, partially offset by strength from new designs across categories including furniture, kids and decorative accessories.

Current wording

West Elm saw 4.8% brand comp decline in the second quarter of fiscal 2024, driven by West Elm continuing to be affected by the customer pull back in furniture as a result of the brand's high percentage of its assortment in the furniture category and our strategy to reduce promotional activity, partially offset by strength from new product introductions.

Previous wording

As of April 28, 2024, we had $1.3 billion in cash and cash equivalents and generated operating cash flow of $226.8 million in the first quarter of fiscal 2024. In addition to our cash balance, we also ended the quarter with no outstanding borrowings under our revolving line of credit. Our liquidity position allowed us to fund the operations of the business by investing $39.5 million in capital expenditures in the first quarter of fiscal 2024, and to provide stockholder returns of $106.6 million in the first quarter of fiscal 2024 through dividends and stock repurchases.

Current wording

As of July 28, 2024, we had $1.3 billion in cash and cash equivalents and generated operating cash flow of $473.3 million in the first half of fiscal 2024. In addition to our cash balance, we also ended the quarter with no outstanding borrowings under our revolving line of credit. Our liquidity position allowed us to fund the operations of the business by investing $70.9 million in capital expenditures in the first half of fiscal 2024, and to provide stockholder returns of $309.4 million in the first half of fiscal 2024 through stock repurchases and dividends.

Previous wording

Subsequent to the filing of our Form 10-K, in April 2024, the Company determined that it over-recognized freight expense in fiscal years 2021, 2022 and 2023 for a cumulative amount of $49.0 million. The Company evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. The Company then evaluated whether the cumulative amount of the over-accrual was material to its projected fiscal 2024 results, and determined the cumulative amount was not material. Therefore, the Condensed Consolidated Financial Statements for the thirteen weeks ended April 28, 2024 include an out-of-period adjustment of $49.0 million to reduce cost of goods sold and accounts payable, which corrected the cumulative error on the balance sheet as of January 28, 2024.

Current wording

Subsequent to the filing of our Form 10-K, in April 2024, the Company determined that it over-recognized freight expense in fiscal years 2021, 2022 and 2023 for a cumulative amount of $49.0 million. The Company evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. The Company then evaluated whether the cumulative amount of the over-accrual was material to its projected fiscal 2024 results, and determined the cumulative amount was not material. Therefore, the Condensed Consolidated Financial Statements for the twenty-six weeks ended July 28, 2024 include an out-of-period adjustment of $49.0 million, recorded in the first quarter of fiscal 2024, to reduce cost of goods sold and accounts payable, which corrected the cumulative error on the Consolidated Balance Sheet as of January 28, 2024.

Previous wording

As we look forward to the year ahead, we are focused on three key priorities, which include (i) returning to growth, (ii) elevating our world-class customer service and (iii) driving earnings. We believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability. We have a powerful portfolio of brands, serving a range of categories, aesthetics, and life stages and we have built a strong omni-channel platform and infrastructure, which positions us well for the next stage of growth. However, the current uncertain macroeconomic environment with the weak housing market, elevated interest rates, layoffs, inflationary pressure, political uncertainty and global geopolitical tension may continue to impact our results. For information on risks, please see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.

Current wording

As we look forward to the balance of the year, we are focused on three key priorities, which include (i) returning to growth, (ii) elevating our world-class customer service and (iii) driving earnings. We believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability. We have a powerful portfolio of brands, serving a range of categories, aesthetics, and life stages and we have built a strong omni-channel platform and infrastructure, which positions us well for the next stage of growth. However, the uncertain macroeconomic environment with the slow housing market, elevated interest rates, layoffs, inflationary pressure, political uncertainty and global geopolitical tension may continue to impact our results. For information on risks, please see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.

Previous wording

Net revenues in the first quarter of fiscal 2024 decreased $95.1 million or 5.4%, with company comp decline of 4.9%. This was driven by continuing customer hesitancy towards furniture purchases, partially offset by strength in our emerging brands, children's home furnishings and kitchen business. Company comp declined 10.9% on a two-year basis and declined 1.4% on a three-year basis.

Current wording

Net revenues in the second quarter of fiscal 2024 decreased $74.3 million or 4.0%, with company comp decline of 3.3%. This decrease was driven by continuing customer hesitancy towards furniture purchases, partially offset by strength in our emerging brands and our children's home furnishings business.

Previous wording

Gross profit decreased $153.5 million or 18.5%, compared to the first quarter of fiscal 2022. Gross margin decreased to 38.5% from 43.8% in the first quarter of fiscal 2022. The decline in gross margin of 530 basis points was primarily driven by (i) higher input costs as we absorbed higher product costs, ocean freight, detention and demurrage due to the impact of supply chain disruption and global inflation pressures, (ii) higher outbound customer shipping costs due to out-of-market shipping and shipping multiple times for multi-unit orders, and (iii) higher occupancy costs resulting from incremental costs from our new distribution centers on the East and West Coasts to support our long-term growth, which was partially offset by (iv) the higher pricing power of our proprietary products, (v) our ongoing commitment to forgo site wide promotions and (vi) our retail store optimization initiatives.

Current wording

Gross profit decreased $171.2 million or 18.4%, compared to the second quarter of fiscal 2022. Gross margin decreased to 40.7% from 43.5% in the second quarter of fiscal 2022. The decline in gross margin of 280 basis points was primarily driven by (i) higher input costs as we absorbed higher product costs, ocean freight, detention and demurrage due to the impact of supply chain disruption and global inflation pressures, (ii) higher outbound customer shipping costs due to out-of-market shipping and shipping multiple times for multi-unit orders, and (iii) higher occupancy costs resulting from incremental costs from our new distribution centers on the East and West Coasts to support our long-term growth, which was partially offset by (iv) the higher pricing power of our proprietary products, (v) our ongoing commitment to forgo site wide promotions, and (vi) our retail store optimization initiatives.

Previous wording

1 Includes occupancy expenses of $196.2 million, $202.6 million and $186.4 million for the first quarters of fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Current wording

1 Includes occupancy expenses of $393.4 million, $405.9 million and $379.4 million for the first half of fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Previous wording

Gross profit increased $127.5 million, or 18.9%, compared to the first quarter of fiscal 2023. Gross margin increased to 48.3% from 38.5% in the first quarter of fiscal 2023. The increase in gross margin of 980 basis points was primarily driven by (i) higher merchandise margins of 480 basis points, (ii) an out-of-period period freight adjustment of 290 basis points, (iii) supply chain efficiencies of 240 basis points, including reductions in returns, replacements, damages and accommodations as well as limiting out-of-market and multiple shipments, partially offset by (iv) the deleverage of occupancy costs of 30 basis points resulting from lower sales.

Current wording

Gross profit increased $196.2 million, or 13.7%, compared to the first half of fiscal 2023. Gross margin increased to 47.2% from 39.6% for the first half of fiscal 2023. This increase in gross margin of 760 basis points was driven by (i) higher merchandise margins of 430 basis points, (ii) supply chain efficiencies of 210 basis points, including reductions in returns, replacements, accommodations and damages as well as limiting out-of-market and multiple shipments, and (iii) an out-of period period freight adjustment of 140 basis points; partially offset by (iv) the deleverage of occupancy costs of 20 basis points resulting from lower sales.

Previous wording

First Quarter of Fiscal 2023 vs. First Quarter of Fiscal 2022

Current wording

First Half of Fiscal 2023 vs. First Half of Fiscal 2022

Previous wording

SG&A increased $3.1 million, or 0.7%, compared to the first quarter of fiscal 2023. SG&A as a percentage of net revenues increased to 28.8% from 27.1% in the first quarter of fiscal 2023. This increase in rate was primarily driven by (i) an increase in advertising expenses to drive sales at an efficient return and (ii) an increase in employment expense due to higher performance-based incentive compensation, which does not include any benefit from the out-of-period freight adjustment, partially offset by (iii) exit costs of $15.8 million and reduction-in-force initiatives of $8.3 million totaling $24.1 million in the first quarter of fiscal 2023 which did not recur in the first quarter of fiscal 2024.

Current wording

SG&A increased $53.5 million, or 5.6%, compared to the first half of fiscal 2023. SG&A as a percentage of net revenues increased to 29.4% from 26.6% for the first half of fiscal 2023. This increase of 280 basis points was primarily driven by (i) an increase in advertising expenses of 160 basis points and (ii) an increase in employment expense of 140 basis points due to higher performance-based incentive compensation, which does not include a benefit from the out-of-period freight adjustment; partially offset by (iii) exit costs of $15.8 million and reduction-in-force initiatives of $8.3 million recorded in the first half of fiscal 2023 which did not recur in the first half of fiscal 2024.

Previous wording

The effective tax rate was 21.8% for the first quarter of fiscal 2024 compared to 23.6% for the first quarter of fiscal 2023. The decrease in the tax rate is primarily due to (i) higher excess tax benefit from stock-based compensation in the first quarter of 2024 and (ii) the tax effect of earnings mix change, partially offset by (iii) the expiration of the statues of limitations related to uncertain tax positions in fiscal 2023.

Current wording

The effective tax rate was 23.8% for the first half of fiscal 2024 and 25.4% for the first half of fiscal 2023. The decrease in the tax rate is primarily due to (i) higher excess tax benefit from stock-based compensation in first half of fiscal 2024 and (ii) the tax effect of earnings mix change, partially offset by (iii) the expiration of the statutes of limitations related to uncertain tax positions in fiscal 2023.

Previous wording

In the regions in which we operate, United Kingdom, Netherlands, Italy and Vietnam have implemented Pillar Two frameworks effective January 1, 2024. The Company's subsidiaries are not subject to Pillar Two minimum tax in the first quarter of fiscal 2024 under the Safe Harbor rules.

Current wording

In the regions in which we operate, Canada, United Kingdom, Netherlands, Italy and Vietnam have implemented Pillar Two frameworks effective January 1, 2024. The Company's subsidiaries are not subject to Pillar Two minimum tax in the first half of fiscal 2024 under the Safe Harbor rules.

Previous wording

For the remainder of fiscal 2024, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment-related costs, advertising and marketing initiatives, the payment of income taxes, property and equipment purchases, rental payments on our leases, dividend payments and stock repurchases.

Current wording

For the remainder of fiscal 2024, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment-related costs, advertising and marketing initiatives, the payment of income taxes, stock repurchases, rental payments on our leases, dividend payments, and property and equipment purchases.

Previous wording

We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as dividends, capital expenditures, stock repurchases and other liquidity requirements associated with our business operations over the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

Current wording

We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as stock repurchases, dividends, capital expenditures, and other liquidity requirements associated with our business operations over the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

Previous wording

As of April 28, 2024, we held $1.3 billion in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $83.3 million was held by our international subsidiaries. As is consistent within our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

Current wording

As of July 28, 2024, we held $1.3 billion in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $74.0 million was held by our international subsidiaries. As is consistent within our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

Previous wording

During the thirteen weeks ended April 28, 2024 and April 30, 2023, we had no borrowings under our Revolver. Additionally, as of April 28, 2024, issued but undrawn standby letters of credit of $10.9 million were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Current wording

During the thirteen and twenty-six weeks ended July 28, 2024 and July 30, 2023, we had no borrowings under our Revolver. Additionally, as of July 28, 2024, issued but undrawn standby letters of credit of $12.0 million were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Previous wording

We have three unsecured letter of credit facilities for a total of $35 million. Our letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under our letter of credit facilities accrues at a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio. As of April 28, 2024, the aggregate amount outstanding under our letter of credit facilities was $0.4 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. Two of our letter of credit facilities totaling $30 million mature on August 18, 2024, and the latest expiration date possible for future letters of credit issued under these facilities is January 15,

Current wording

We have three unsecured letter of credit facilities for a total of $35 million. Our letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under our letter of credit facilities accrues at a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio. As of July 28, 2024, the aggregate amount outstanding under our letter of credit facilities was $0.7 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. On August 16, 2024, we renewed two of our letter of credit facilities totaling $30 million on substantially similar terms. The two letter of credit facilities mature on August 18, 2025, and the latest expiration date possible for future letters of credit issued under these facilities is January 15, 2026. One of the letter of credit facilities totaling $5 million matures on September 30, 2026, which is also the latest expiration date possible for future letters of credit issued under the facility.

Previous wording

For the first quarter of fiscal 2024, net cash provided by operating activities was $226.8 million compared to $342.5 million for the first quarter of fiscal 2023. For the first quarter of fiscal 2024, net cash provided by operating activities was primarily attributable to net earnings adjusted for non-cash items and an increase in income taxes payable, partially offset by accounts payable (as a result of supplier payment timing and the out-of-period adjustment) and accrued expenses and other liabilities. Net cash provided by operating activities compared to the first quarter of fiscal 2023 decreased primarily due to a decrease in accounts payable (as a result of supplier payment timing), partially offset by an increase in net earnings adjusted for non-cash items.

Current wording

For the first half of fiscal 2024, net cash provided by operating activities was $473.3 million compared to $715.0 million for the first half of fiscal 2023. For the first half of fiscal 2024, net cash provided by operating activities was primarily attributable to net earnings adjusted for non-cash items, partially offset by an increase in prepaid expenses and other assets (as a result of timing of income tax payments and deposits associated with new contracts) and a decrease in accrued expenses and other liabilities. Net cash provided by operating activities compared to the first half of fiscal 2023 decreased primarily due to higher spending on merchandise inventories, a decrease in accounts payable (as a result of supplier payment timing), and a decrease in income taxes payable, partially offset by an increase in net earnings adjusted for non-cash items.

Previous wording

For the first quarter of fiscal 2024, net cash used in investing activities was $39.5 million compared to $49.9 million for the first quarter of fiscal 2023, and was primarily attributable to purchases of property and equipment related to technology, supply chain enhancements and store construction.

Current wording

For the first half of fiscal 2024, net cash used in investing activities was $71.0 million compared to $92.7 million for the first half of fiscal 2023, and was primarily attributable to purchases of property and equipment related to technology, supply chain enhancements and store construction.

Previous wording

For the first quarter of fiscal 2024, net cash used in financing activities was $193.7 million compared to $362.4 million for the first quarter of fiscal 2023, primarily driven by tax withholdings remittance related to stock-based awards, payment of dividends and repurchases of common stock. Net cash used in financing activities for the first quarter of fiscal 2024 decreased compared to the first quarter of fiscal 2023, primarily due to a decrease in repurchases of common stock, partially offset by higher tax withholdings remittance related to stock-based awards (as a result of remittance timing).

Current wording

For the first half of fiscal 2024, net cash used in financing activities was $398.2 million compared to $476.6 million for the first half of fiscal 2023, primarily driven by repurchases of common stock, payment of dividends and tax withholdings remittance related to stock-based awards. Net cash used in financing activities for the first half of fiscal 2024 decreased compared to the first half of fiscal 2023, primarily due to a decrease in repurchases of common stock, partially offset by higher tax withholdings remittance related to stock-based awards.

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the first quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the second quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.